War is a human crisis, much more than a financial one. Without wanting to diminish that, this article focuses on how markets are digesting the effects of war in the Middle East.
It is clear that the immediate effects are on energy prices and the regional economy. You can see this in the chart of the Vix index (aka the fear index) for the last 12 months below. We are at levels last seen in November 2025, and some distance from, for example, last year’s Liberation Day adventures.
What are the main effects on asset prices?
Volatility has clearly spiked however, and there has been a negative impact in major markets. This has increased as it has become more likely that the war will last some time.
In fact the initial market reaction was almost relaxed. In the first week following strikes on Iran, for example, the S&P 500 index of top US shares rose on Monday and Wednesday, to return to its closing price of Friday 27 February, before the strikes on Iran.
Oil prices have now risen around 50%, to over $105 for Brent crude, mainly due to fears of the closure of the Straits of Hormuz, which carry 20% of global oilflows. This rise in prices will feed into inflation, interest rates, and ultimately economic activity.
Major markets like the Eurostoxx 600 index of European shares have given back a decent proportion of the growth achieved in the last six months – but remain materially up.
A highly diversified portfolio or multi-asset fund will have exposure a broad range of assets, offsetting stock weakness. These portfolios hold assets like commodities, bonds and gold which offer valuable protection in times like this.
There are risks – as well as reasons for hope
Having said that, there are clear risks. The US and Israeli war aims seem extensive, the consequences of any military offensive are highly uncertain, the Iranian Revolutionary Guard has allies and is a powerful force, and three weeks in, there is no clear end-point for the conflict. It could spread beyond the immediate region, for example, threatening the Suez Canal, through which over $1 trillion of assets move each year. If that were to occur, the market effect could certainly be more serious.
On the other hand, the likely US desire for an off-ramp, depletion of Iranian defenses, and plans for protection of the oil market offer support, while some investors have used the opportunity to reinvest into technology stocks at lower prices than only a few weeks ago.
What should you do?
It’s a fast moving situation, and we don’t presently advise that customers make adjustments to current holdings, at a time when it is difficult for markets to price the risks and opportunities. If you are investing via Moneycube, you will already hold a diversified portfolio which will spread your risk.
To manage the heightened volatility arising from the Iran crisis, if deploying lump sums it may be worth doing so in smaller portions over a longer period.
We expect market conditions to remain volatile in the near term. Moneycube is monitoring events and remains available to discuss the impact on your portfolio as we navigate the changing investment environment.
